Top Inventory Management Challenges and How to Tackle them Effectively

Table of Contents

1. Introduction
2. Top Inventory Management Challenges and their Solutions
– Lack of Real-time Inventory Visibility
– Overstocking and Understocking
– Labored Data Bottlenecks
– Redundant Manual Procedures
– Recognizing and Tracking Obsolete Products
– Warehouse Space Management
– Understanding Demand and Volatility
– Lack of Integration with Sales Channels
– Handling Perishable and Fragile Stock
– Vendor Access and limited information
– Packaging Wastage
– Returned Inventory Flow
3. Let’s Encounter the Inventory Management Challenges

In the e-commerce world, customer behavior is meant to evolve, and so must the supply chain. Retailers must rethink their strategies to keep up with these shifts. The question is how? It all comes down to real-time inventory visibility powered by automation and advanced technology. Let’s explore this in detail! 

Efficient inventory management is the essence of a successful e-commerce business. Having your back-end e-commerce processes in place is vital for a good front-end experience. Rising competition in the e-commerce industry has also led businesses to adopt and embrace advanced technologies to sustain and thrive in the market. 

But before retailers can implement these advancements, they must first address critical inventory management challenges that arise with the shifts. So here are the common challenges with proven solutions for efficient inventory control.

Top Challenges & Solutions of Inventory Management – 

While there are many problems faced in inventory management, here are the top challenges and solutions to overcome them.

1. Lack of Real-time Inventory Visibility

This is one of the biggest challenges in inventory management. As a business, you need to know the real-time status of your stocks. No matter where the goods are, you must keep a keen track of them. Poor inventory monitoring leads to delays in shipping and delivery, unnecessary shipping costs, and a lack of inventory balance. It does not only lead your business to revenue leakages but also develops customer dissatisfaction in the long run.

How can you solve it? 

Real-time Inventory Management System: This tells you exactly where your goods are. Additionally, it will also give your closer insights into the availability of stocks at that moment. Check out how The House of Rare achieved 360-degree visibility of inventory with a robust inventory management system.

2. Overstocking and Understocking

Overstocking occurs when a business holds excess inventory, tying up valuable capital and storage space and sometimes leading to product damage over time. On the other hand, understocking happens when inventory levels fall short, resulting in lost sales opportunities due to insufficient stock.

How can you solve it?

Effective Demand Forecasting: The key to tackling overstocking and understocking is leveraging sophisticated analytics and reports dashboards that can help you gain a better understanding of your data and keep track of upcoming events while checking the needed inventory levels for the future.

3. Laboured Data Bottlenecks

Accurate inventory reports and analytics rely on raw data, like SKU details, daily orders, and returns. Your system needs up-to-date information to generate these insights effectively. However, relying on manual data entry for these daily records can create bottlenecks, slow your processes, and increase the risk of human errors in your reports.

How can you solve it?

Business-friendly Inventory Management: Automating your inventory management can streamline operations and tackle the challenge of manual data documentation. A flexible solution allows quick updates, such as adding new SKUs, and eliminates bottlenecks. You will maintain accurate inventory data and respond rapidly to market changes with correct and updated reports.

 4. Redundant Manual Procedures 

Tracking your inventory with basic manual procedures can lead to errors in managing goods. Manual picking, packing, and shipping processes can also slow down order fulfillment, leading to delayed delivery and hampering customer satisfaction.

How can you solve it?

Invest in Cutting-edge Technology Solutions: To address this challenge, businesses should invest in modern technology solutions such as inventory management, warehouse management, and multichannel order management. Automating the procedures will make it easier to track and report on the availability of the goods. 

5. Recognizing and Tracking Obsolete Products 

It is common for some products to become obsolete after their demand significantly drops. Unfortunately, these obsolete goods are often left abandoned in warehouses and forgotten when their need arises. At such times, inventory managers may order new products that leave the old stock unused, resulting in a loss.

How can you solve it? 

Stock Control Systems: This system is useful for hunting down dead inventory and using it when required. Expiry management and stock rotation methods like ‘First In, First Out’ (FIFO) or ‘First Expiry, First Out’ (FEFO) ensure that older inventory is used before newer stock. This helps prevent stockpile accumulation and ensures that products are consumed as received.

Discover how the Urban Company minimized the dead stock and achieved 8X sales order growth with comprehensive reports and a dashboard.

6. Warehouse Space Management

While we’ve covered the basics of inventory storage, the strategy behind it is crucial. An effective storage blueprint ensures products are in the right place during inbound and outbound processes. Improper organization, like keeping fast-selling items far from the packaging station, affects efficiency, causing disruptions and lost productivity.

How can you solve it? 

Smart Allocation and Flow: Optimizing inventory placement is essential for smooth operations. Just as gas stations are conveniently located on the road, your inventory should be strategically stored based on your business needs. Smart solutions roadmaps your storage and use accurate data to enhance inventory flow using FIFO, FEFO, and LIFO techniques.

7. Understanding Demand and Volatility

Understanding demand and volatility is essential for e-commerce businesses in today’s dynamic markets. Demand for goods can be uncertain and depend on factors like season, geographic location, and market trends. A pertinent example would be the COVID-19 pandemic, which was caused by volatile consumer behavior toward products. Additionally, market trends also vary. This can lead to a shortage of goods when the demand rises or excess stock when the demand is low.

How can you solve it? 

Comprehensive Reports and Dashboard: Using advanced inventory management software equipped with comprehensive reports and a user-friendly dashboard can analyze real-time data. This will enable businesses to predict demand and enhance their forecasting accuracy precisely. Having access to up-to-date and accurate information empowers businesses to make informed decisions and promptly adjust their operations to meet changing demand patterns.

8. Lack of Integration with Sales Channels

In today’s omnichannel retail environment, businesses often sell their products through various sales channels, such as online stores, physical stores, marketplaces, and social media platforms. Each channel may have its own inventory tracking system, which can lead to discrepancies and inconsistent updates across different channels. For example, suppose a product sells out on one platform, but the inventory is not updated on another. In that case, there’s a risk of overselling, resulting in canceled orders and unhappy customers.

How can you solve it? 

Centralized Inventory Management System: Implement an integrated inventory management system that synchronizes inventory levels across all sales channels in real-time. This ensures that inventory data is accurate and up-to-date, reducing the risk of overselling and helping to meet customer demand more efficiently.

9. Handling Perishable and Fragile Stock

Certain products, like perishable goods (e.g., fresh produce, dairy products) and fragile items (e.g., glassware, electronics), require special handling and care during storage and transit. These items have limited shelf lives and are susceptible to damage, making it crucial to track their conditions and use them before they expire or become damaged.

How can you solve it? 

Efficient Expiry Management System: Businesses should implement an efficient expiry management system to effectively manage perishable and fragile stock. This involves clear product labeling and sorting, adhering to the first-in-first-out approach, real-time monitoring of storage conditions, automated alerts, and ensuring stock visibility through the inventory management system.

Check out how The Man Company seamlessly achieved minimal expiry and spoilage by implementing expiry management methods, including FIFO and FEFO.

10. Vendor Access and limited information

Timely inventory replenishment is crucial to avoid the pitfalls of challenges like overstock and understock. Automating the process of sending purchase orders can help synchronize inventory restoration offered by the solutions in the market. However, this raises concerns about whether vendors will adapt their methods to align with your system and gain access to your insights. Let’s explore this in detail.

How can you solve it? 

Vendor Panel: Some information exchange is necessary to automate purchase orders with your vendor. However, advanced solutions offer a separate vendor panel that allows your vendor to process orders quickly without accessing your business data. Thus, you can maintain control while facilitating efficient communication and order management.

11. Packaging Wastage

When processes rely on manual input, the cognitive load increases, leading to confusion and potential errors in packaging during daily operations. This results in ongoing costs and can lead to significant revenue loss, ultimately impacting your profits.

How can you solve it? 

Image-Assisted Sorting: Advanced solutions offer features like image-assisted sorting to reduce the cognitive load on packaging personnel. This advancement ensures accuracy with every package. By streamlining the process, employees can focus on their tasks without remembering every detail, resulting in improved efficiency and fewer chances of human errors, saving all the packaging waste.

12. Returned Inventory Flow

Inventory challenges extend beyond order processing; handling returned inventory presents a significant hurdle for many sellers. Whether a customer-initiated return (CIR) or a return to origin (RTO), unprocessed returns can lead to inventory loss. Sellable products must be restocked as “good inventory,” while damaged items require additional attention. This entire process demands thorough quality checks and can be overwhelming without automation.

How can you solve it? 

Returned Inventory Sorting: Automating returned inventory sorting and quality checks can transform a challenging task into a smooth process. With a systematic approach, automated quality checks ensure that sellable items are quickly restocked, minimizing missed sales opportunities and maximizing inventory value. A streamlined process like this helps maintain efficiency and keeps inventory ready for immediate resale.

Let’s Make Inventory Management Easier!

Efficient inventory management system is essential for the success of any retail business, especially in today’s dynamic business landscape. Also, with rising competition in the e-commerce industry, it is essential to have all your e-commerce back-end automation aspects in place. Rather than hunting for each service individually, it is wise to implement a full-stack solution that fulfills all your e-commerce automation needs in one place. With the right strategies and technology in place, businesses can navigate inventory challenges and stay ahead in an ever-evolving retail world.

See how to configure, manage and execute complex order routing processes effectively and efficiently with an e-commerce inventory management system –

Unicommerce offers a wide range of e-commerce solutions like Warehouse Management System, Inventory Management System, Multichannel Order Management Solutions, Full-stack D2C E-commerce Platform, and Omnichannel Retail Solutions. Unicommerce offers simplified solutions for e-commerce inventory management and ensures the top-notch performance of your business by empowering you to overcome inventory management challenges.

Realted Read on Inventory Management:

• What is Inventory Management?
• What is Inventory Tracking?
• What is an Inventory Control System?
• Inventory Management Techniques
• Benefits of Inventory Management System
• Multichannel Inventory Management Challenges
• Inventory Management for Small and Medium Businesses (SMBs)
• Best Inventory Management Techniques To Scale Your Business
• What is Warehouse Management System?
• What is Inventory Control System?